Emami Limited

Mohan Goenka

DIRECTOR, EMAMI LIMITED

Rajesh Sharma

PRESIDENT, FINANCE AND INVESTOR RELATIONS, EMAMI LIMITED

Sameer Gupta

IIFL SECURITIES LIMITED

INR 432 crore

nd cool talc segment. The transaction envisages purchase of the brand for a total consideration of INR 432 crore excluding taxes and duties, which has been funded through internal accruals. Emami has always bee

20%

rom prickly heat caused during harsh summer and is one of the leading brands in its segment with a 20% market share. The iconic brand has a strong brand equity with a high consumer connect through its

INR 113 crore

h its vastly popular jingle, “aaya mausam thande Dermicool ka”. The brand has clocked net sales of INR 113 crore in the calendar year 2021 and is available across the country with a direct reach of 1.25 lakh ou

1.25 lakh

INR 113 crore in the calendar year 2021 and is available across the country with a direct reach of 1.25 lakh outlets and an indirect reach of about 1.8 million outlets. The brand is highly profitable and en

1.8 million

ailable across the country with a direct reach of 1.25 lakh outlets and an indirect reach of about 1.8 million outlets. The brand is highly profitable and enjoys 55% gross margin and 38% EBITDA margins. Bein

55%

ets and an indirect reach of about 1.8 million outlets. The brand is highly profitable and enjoys 55% gross margin and 38% EBITDA margins. Being a noncore brand to the seller they wanted to close the

38%

each of about 1.8 million outlets. The brand is highly profitable and enjoys 55% gross margin and 38% EBITDA margins. Being a noncore brand to the seller they wanted to close the deal in this financi

INR 100 crore

der in six categories where we operated, and we have eight brands generating revenues of more than INR 100 crore. Though I have covered most of the points in by opening remarks, but still we have shared a pres

INR 432 crore

in the prickly heat and the cool talc segment. We acquired the brand for a total consideration of INR 432 crore, excluding taxes and duties. As I mentioned, McKinsey worked on the business and the commercial di

INR 760 crore

their recommendation we moved ahead to acquire the brand. The size of the total category is almost INR 760 crore, which is the cool and the prickly heat segment. It was growing at almost a 12% CAGR pre-COVID whe

12%

s almost INR 760 crore, which is the cool and the prickly heat segment. It was growing at almost a 12% CAGR pre-COVID whereas the talcum powder category was going at just 5% CAGR. This category witness

5%

t was growing at almost a 12% CAGR pre-COVID whereas the talcum powder category was going at just 5% CAGR. This category witnessed a decline due to COVID because the last two years during the peak su

“As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes.”

“Rajesh Sharma from Emami’s side who will be addressing all your queries regarding this acquisition of Dermicool that they have announced.”

“This acquisition is therefore a part of our aggressive growth strategy and we plan to leverage the brand with our existing strengths to make our presence stronger and deeper in the cooling talc segment.”

“It is not only present in a high growth and a low penetrated category, but it is also a highly profitable brand, which will be EPS accretive in the first year of operations itself.”

“It was growing at almost a 12% CAGR pre-COVID whereas the talcum powder category was going at just 5% CAGR.”

“So, in terms of pricing, brand, regional dominance, could you take us through what will be the differences?”

“So will it be fair to say that initial marketing spends will be on higher site given MNC focus was not there and in fact, Dermicool, as you said, lost share to your own brand.”

“It’s fair to assume that your own brand, Navratna Cool Talc could have been going ahead of the pre-COVID CAGR, four year CAGR that is there for the category, right, because you continue to gain in market share?”

“Yes, I was just saying that would it be fair to assume that Navratna Cool Talc is growing ahead of this four year CAGR of 11% for the category, your growth would have been much higher, right, because you have gained market?”

“So, I do not see much pressure on EBITDA margin going forward.”

Mohan Goenka

19

Rajesh Sharma

19

Harit Kapoor

10

Shirish Pardeshi

7

Gaurav Jogani

5

Moderator

4

Prakash Kapadia

3

Tejas Shah

3

Abneesh Roy

2

Sameer Gupta

2

Mohan Goenka

Ladies and gentlemen, good day and welcome to Emami Limited Conference Call to discuss acquisition of Dermicool brand hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sameer Gupta from IIFL Securities. Thank you, and over to you Mfr. Gupta. Thanks, Nirav. Good day, everyone and I would like to first thank Emami to give us this opportunity to host this call and we have Mr. Mohan ji and Mr. Rajesh Sharma from Emami’s side who will be addressing all your queries regarding this acquisition of Dermicool that they have announced. And without taking more time, I would request Mohan ji and Rajesh to address with their opening remar

Mohan Goenka

Whereas Dermicool’s almost 80% to 90% of the revenue comes from 150-gram SKU. So they operate with two different set of consumers, I do not think they overlap that way. And in terms of market share you mentioned it is 20% versus say five, six years back when say Reckitt would have initially bought out from Paras, any sense you have on market share? And I was surprised that this is a more specific product for prickly heat, but it is a number three player behind you. So is it because you have two brands in that space that is why you were larger than Dermicool? No, I am only talking of Navratna because BoroPlus prickly heat is a very small segment for us, but yes we overtook Dermicool because we were a general talc and as I said because of the smaller SKUs our sales is much, much higher than Dermicool today.

Mohan Goenka

And very honestly, we also believe that Reckitt did not focus so much on this category, whereas Navratna Cool Talc we were very, very aggressive on our advertising and communications over the last few years. That is also one of the reasons that Navratna overtook Dermicool in a very short time. So will it be fair to say that initial marketing spends will be on higher site given MNC focus was not there and in fact, Dermicool, as you said, lost share to your own brand. So will you need to spend much higher and will you prioritize, say Dermicool ad spends over Navratna ad spends? No, definitely we would have to increase our expense because over the last two years none of us have spent so much money because of COVID during the peak summer seasons. But at the same time we have done a lot of maths, I think, even after there is a scope of increasing margins, so we would do that and we would invest on advertising. So there will not be much pressure on the margin front. Sure. My second and last

Harit Kapoor

Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead. Hi, good afternoon, Mohan ji, I just had two or three questions, when Reckitt purchased the Paras portfolio, they bought it at…

Mohan Goenka

Yes, so my question was, when Reckitt purchased the Paras portfolio it was at, I think between 7x to 8x sales, eventually sold out a part of it in a year to Marico and now this transaction happening at probably three and three and a half times’ peak sales for this brand, I just wanted to get a sense of why do you think that they have under invested in this space in a portfolio that they paid a tremendous premium for, any thought from your end on why this has been under leveraged? No, Harit, I can’t comment on that, honestly, because that is their strategy, why did they under invest. Whereas Navratna cool talc we really invested and in the end maybe they didn’t believe in the category, there could be multiple reasons on the overall size of Reckitt, maybe this was too small for them to focus on, so there could be multiple reasons. As I said, we found it to be very attractive, we still believe that the market can grow, every consumer in India cannot consume deo, so talcums are here to sta

Harit Kapoor

It’s fair to assume that your own brand, Navratna Cool Talc could have been going ahead of the pre-COVID CAGR, four year CAGR that is there for the category, right, because you continue to gain in market share?